1. The marketing department of the X Corporation provided its management with the following estimate of the demand function for the firm’s product:

Q^d_X = 12,000 – 3 P_X + 4 P_Y – 1M + 2A_X

where Q^d_X is the amount consumed of good X, P_X is the price of good X, P_Y is the price of good Y, M is consumer income and A_X is the amount of advertising devoted to good X. Suppose good X sells for $200 per unit, good Y sells for $15 per unit, the firm utilizes 2,000 units of advertising on good X and consumer income is $10,000.

1. If the cost of producing a unit of good X is a constant $1,000 per unit, what are the profit-maximizing values of Q_X and P_X?

Answer rating: 100% (QA)

To find the profitmaximizing values of QX quantity of good X and PX price of good X we will need to ... View the full answer